Teachers Retirement System suggests growing money on trees to stem growing financial worries
11/20/2013 04:58 PM
The fresh estimates for what the Kentucky Teachers Retirement System will need are $390 and $487 million dollars for the next two years. But if the General Assembly doesn’t act in January waits another two years, the teachers’ retirement fund debt will double, the system’s executive director said Wednesday.
There weren’t any smiles from legislators when Gary Harbin, the executive secretary for the Kentucky Teacher’s Retirement System, laid out what he said the KTRS would need to return to solid fiscal footing.
Currently the retirement system is 54-percent funded, and the system is looking at a $12 billion shortfall. But if the legislature doesn’t act in 2014, new accounting rule changes will mean that the fund’s debt — or unfunded liability — will almost double to $23 billion.
Harbin also said if nothing changes, the fund will be out of money by 2036.
The solution Harbin is proposing would be to borrow, or sell bonds, to cover some of the debt. He urged lawmakers go that route because interest rates are currently low at around 4.3 percent. The plan would also call for ramping up the state’s contributions to the fund over the next six years to reach what it needs to pay as the employer of the teacher.
Harbin said that the state might be under utilizing assets such as space along interstate highways where he proposed growing timber.
“Timber planted there and raised over a 30-year period. Biological timber grows eight percent a year and doesn’t care if the market goes up or down,” Harbin said – which did earn a few grins from those in the crowd and hushed conversation from legislators.
Rep. Brent Yonts, D-Greenville, asked Harbin what bonding nearly $1 billion could do to the debt rating of the commonwealth. Harbin responded that Kentucky already has $12 billion in debt from the retirement system and that would increase to nearly $23 billion if a plan is not put in place.
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